This chapter shows that employment growth in the U.S. economy has been much faster than in many other advanced countries. Productivity growth and real wage growth have lagged. It disputes the idea that the U.S. economy has somehow lost out to other economies, particularly because employment has grown rapidly.

Partly as a consequence of the rapid employment growth, productivity growth and real wage growth have been slow. Part of the slow productivity growth has resulted from a slowing of technical change. Students may be surprised, however, to learn that productivity growth and technical change in the manufacturing sector increased rapidly in the 1980s.

The chapter points out that the United States is in control of its economic destiny. Individuals, of course, always have the option of saving and realizing a return to savings in the future. Similarly, as a society, we can increase our saving and investment. If we do, we will have more rapid productivity and wage growth in the future.

Some students will be surprised to learn that hourly productivity in the United States is much higher than in Japan. It is true that productivity growth is lower in the United States, but to a certain extent, it is natural that economies with lower productivity will have faster productivity growth than economies with higher productivity. The chapter concludes that there is no reason to think that productivity growth in other countries comes at the expense of productivity growth in the United States.

Instructional Objectives

After completing this chapter, your students should know:

1. That the value of the marginal product of labor underlies the demand for labor.